Ace investor Rakesh Jhunjhunwala is known to be a savvy stock-picker. However, some of his recent bets in initial public offerings (IPOs) have failed to click, at least in the near term. Jhunjhunwala is said to have made a large application in the ICICI Prudential Life Insurance IPO, which fell 10.7 per cent on debut.
The billionaire investor's investment in the IPO of InterGlobe Aviation, which runs the country's largest airline (in terms of passengers carried) IndiGo, had also gone below its issue price after three months of listing, but is now up 20 per cent. To be fair, Jhunjhunwala may be hoping to make healthy returns on these two market leaders in the long term.
Commission declaration headache for fund houses
Mutual fund houses are gearing up to deal with the situation arising after distributor commissions are declared for the first time from October 1. The Securities and Exchange Board of India (Sebi) asked fund houses to declare commissions being paid to distributors by fund houses on a half-yearly basis, and fund houses have to put up this information on their websites.
The main fear of fund houses and distributors is that investors might shun the latter if they see high commissions. Worse still, big investors may also seek kickbacks from distributors. "The biggest fear is that even before moving to a direct plan, some investors may stop investments initially leading to reduction in fresh flows for fund houses," says a CEO of a fund house.
HNIs take 'shareholder' route in IPOs
Some of the recent initial public offerings (IPOs) made special reservations for 'shareholders' of their parent company. For instance, ICICI Prudential Life IPO had 10 per cent quota for ICICI Bank shareholders. Market players said a lot of investors, particularly high net worth individuals (HNIs), were seen taking advantage of this. "As the HNI category normally gets hugely oversubscribed, some investors routed their applications through the shareholder category," said a broker, adding that the loophole could be plugged by imposing an investment ceiling for applications made under this category.